16 July 2013: Nifty Elliott wave analysis: RBI’s step will be disastrous for equity price. They handle one problem to give a birth of next problem. Technical support – 5960-5910.

You must read previous articles and watch the given chart carefully to understand this article completely.

For 16 July 2013: -

On 15 July 2013, FII Sold INR 227.25 crs and DII bought INR 454.28 crs.

FIIs are not looking confident on Indian market. They are giving preference to the developed market over emerging market. It can be sad that emerging market has better valuation than developed one but it is currency which is turning as deciding factor. Nifty stand above 6000 marks and it is itself a big thing.

Now Indian market needs a trigger of reform which can convince FII for their investment in India. Most important step will be bank rate cut but RBI governor keep on issuing adverse remark to give a jerk to the market. One such remark came last night too. We need to understand that India is struggling on food inflation which cannot be handled by rate cut. This is the reason that inflation remains higher in past four years. It is a big failure of RBI. Their attempt to handle inflation has given adverse impact on growth.

RBI issued series of steps to curb rupee decline by tightening liquidity and making dollar costlier to banks. The RBI raised the Marginal Standing Facility (MSF) rate and Bank Rate each by 200 basis points to 10.25 percent, capped the amount up to which banks can borrow or lend under its daily liquidity window and announced a sale of government securities through an open market operation.

This is going to give adverse impact on equity price today. Just think when market was demanding for better liquidity then are pulling out money. It is a disastrous step. When all global market hit their life time high in 2013, we left behind. This is the reason. It is the failure of correct policy making. Neither they can control inflation nor can they boost growth.

Technical charts are advising caution if Nifty stand below 5980. Till yesterday charts were saying for a move towards 6100 marks. Now the recent development is giving reasons for some correction. Trend reversal will not come as long as we are above 5900 levels. Expect a weak opening.  

Strategy for Nifty July future – SGX JULY NIFTY is trading with a loss of 55 points right now. It is trading at 5972. We are going to see gap down. Technical support will be in the zone of 5980-5970 zone. It is very important that it should not go below this range. If it saves 5960-5970 then we can expect intraday rebound towards 6020 again.

S&P 500 – Current formation is giving a hint that S&P 500 will give a new all-time high by July month itself or by first week of August.

It is playing hide and seek game near life time high. For short term it has entered in heavily overbought zone. In ideal condition, it should have some correction but I am feeling that correction is coming in the form of time consolidation. This may give few days of silence before a big storm to take away even 1700 marks technical support stand at 1660-1655. No correction can begin it below 1655 in any case. Use dip to buy only.  

Regards,

Praveen Kumar